Transcription is one of the most important regulatory mechanisms controlling the stepwise program of epidermal differentiation. Epidermis has been used as an excellent model to study the process of cellular differentiation because the cells form a stratified structure during development, and each stratum is easily identified by morphology and expression of specific markers. Stratification of the epidermis commences during embryonic development and is a process that continues to occur throughout the life of the organism. The process entails the outward movement of the proliferative basal cells that are adjacent to the basement membrane toward the surface of the skin. The stratification is concurrent with a Ca++-dependent differentiation process and the layer-specific expression of structural and enzymatic markers. Our research efforts have focused on characterizing the regulation and function of the DLX3 homeobox transcription factor, a member of the murine DLX family, with essential roles in epidermal development. Transgenic temporal and spatial mis-expression of DLX3 in the pre-differentiated basal layer caused an abnormal skin phenotype, characterized by cessation of proliferation and premature differentiation of the basal cells judged by the upregulation of expression of late differentiation markers such as loricrin and filaggrin. We have shown that DLX3 modulates the cell cycle during the epidermal differentiation process using cultured keratinocytes and mouse models with inducible-ectopic expression of DLX3. We recently reported a novel DLX3-dependent network that constrains epidermal hyperplasia and squamous tumorigenesis. By integrating genetic and transcriptomic approaches, we demonstrate that DLX3 operates through a p53-regulated network. In contrast, DLX3 loss promotes a mitogenic phenotype associated with constitutive activation of ERK. DLX3 expression is lost in human skin cancers and is extinquished during progression of experimentally induced mouse squamous cell carcinoma (SCC). These results establish the DLX3-p53 interplay as a major regulatory axis in epidermal differentiation and suggest that DLX3 is a modulator of skin carcinogenesis. Our results have also indicated that epidermal deletion of the DLX3 homeodomain transcription factor leads to disruption of the barrier formation and is linked to the development of an inflammatory response characterized by the accumulation of IL-17-producing CD4(+) T, CD8(+) T, and T cells in the skin and lymph nodes. The gene expression signature of this conditional mouse model shared features with lesional psoriatic skin, and DLX3 expression is selectively decreased in psoriatic skin.